First and most importantly, cash does not protect against inflation. Despite a relatively benign inflationary environment, a pound still buys you a lot less now than it did twenty years ago. Secondly, if you are investing for the long term, taking more risk could actually bring you greater returns. In fact, even if you put your money in a decent deposit account, you are still less likely to reach your long term investment goals than if you invest in equities and/or bonds.
In theory, this is all very well but equities, bonds and the income that they can earn you may go down in value as well as up. How do you go about ensuring you get the best return you can whilst also ensuring you don’t lose the lot? The answer is diversification.
Here the process becomes quite personal, as the exact mix will depend on your age, the term of your investment, your goals and your attitude to risk. It is important to get sound, impartial advice on what financial products are best suited to your needs.
It is important you are aware that the value of units in a unit linked investment, as well as any income they generate can fall as well as rise and that past performance is not a guarantee of the future. If you surrender the contract, especially in the early years, you may get less than you invested. If you make withdrawals from an investment, which exceed the net growth rate achieved by the underlying investments, its value will fall. If an income is being drawn immediately, you should be aware that this could have the effect of eroding the initial value of the capital invested.